Tuesday, 30 April 2013

Margaret
Thatcher, said former trade minister David (Lord) Young, reversed a sixty year decline in the British economy. She bequeathed a “generation of growth” gushed
the Confederation of British Industry. She “breathed life into free
enterprise,” evinced the former boss of British Petroleum.

But for
her, Britain, culturally and
economically, would resemble Bucharest
circa 1978, minus the exciting nightlife.

So goes the
official interpretation of Margaret Thatcher. But reality, says the Left,
paints a profoundly different picture. Economic growth was actually no better
in the 1980s than the benighted 1970s – both record an unremarkable average of
2.2%.

Between
1990 and 2009, after Margaret Thatcher was deposed, but when her economic tenets
were unquestionable, Britain had a growth rate of 1.7%. And that is obviously before the current stagnation.

Far from
releasing the forces of enterprise, Margaret Thatcher released the forces of
inertia.

Zzzzz

It might
seem, on the surface, that this battle of GDP figures is about as fascinating as
algebra. But it has significant implications. For if, say the Keynesians, the
economic boasts of conservatives are hollow, then a kind of ‘Back to the
Future’ logic is validated. The post-war era, with its strong trade unions, state
ownership, much greater equality and regulation, suddenly appears, not only more appealing socially,
but more economically persuasive as well.

But there
is a fly in the Keynesian soup. Scroll down one Red Pepper Thatcher article and
you’ll find a comment by “Geroge”,
an unabashed (and hurried) fan of the blessed Margaret. But he makes an
interesting point. You would expect, he says, growth figures in the 1950s,
coming just after the huge destruction of World War Two, to be high. Emergent
war economies have high growth. Thatcher’s performance three decades later,
although comparatively rather shoddy, was not half bad in the circumstances.

All of Europe experienced an economic boom in the post-war
decades. It was in the post-war years, writes Thomas Frank in Pity the Billionaire,that France,
Italy, Belgium and Sweden, “embarked on their greatest
boom periods in modern times”. You could add West
Germany, Spain,
Austria and, to some extent,
Britain,
to that list. This, despite frequent corruption and political favouritism;
malaises the Right now dubs “crony capitalism”. These apparent impediments to
growth made no discernable difference.

Outside
Europe, the US,
though physically virtually untouched by war, received a massive economic shot
in the arm by other countries’ need to recover.

If that
boom period was, in large measure, a result of post-war reconstruction, the
implications are damning to both Keynesians and austerians/conservatives. The
left-wing but anti-Keynesian economist Harry Shutt has argued that the much vaunted three decade long, post-World
War Two boom, was due as much to pent up demand after the Great Depression and total
war, as it was to wise economic policies.

Revolutionary Road

Seen in
historical perspective, the 1950s and 1960s were the only time that capitalism worked for everyone. Growth was high,
living standards rose and full employment was a reality. Unemployment in Britain,
between 1950 and 1973, stood at an average 1.6%.

The disquieting
insight is this – that the good times were dependent on the bad times that
preceded them. The growth and economic contentment of the 1950s and ‘60s were a
direct result of both the economic devastation of the Great Depression and the
physical, near-apocalyptic destruction, of World War Two

In other
words, capitalism is a system that relies on periodic bouts of mass destruction
to prosper. If the prior destruction doesn’t happen, capitalism eventually
stagnates.

Hence
Thatcherism, which regards itself as the apogee of economic dynamism, turned
out to be such a busted flush economically.

As Shutt
has pointed out, government policies in Europe since the Second World War have been
about preventing mass destruction from happening again – either economically
through the business cycle, or physically, through war. Private businesses have
been propped up and bailed-out, stock markets manipulated and consumers
artificially created through the spreading of mass debt.

Bluntly put,
because nobody, for obvious reasons, wants the initial orgy of destruction to
happen, we can’t have the benefits of ensuing healthy economic growth and
abundant jobs. So we have had fake, as opposed to organic, growth. And now the
mask has slipped.

Thus we are
locked into a cycle of diminishing returns, no matter what economic strategy, under capitalism, is pursued.

Don’t
mistake this analysis as some kind of right-wing mea culpa. It matters a lot
that the austerians are stopped in inflicting any more unnecessary suffering on
people who had no part in causing the economic crisis. It matters a lot that
the work capability scandal in Britain
is exposed and stopped. It matters a lot that the sadistic economy-destroying,
life-shredding experiment in Greece,
Spain and Portugal, is
ended.

But the
obverse argument of many opponents of austerity (let’s call them Left Keynesians
for short) that increased government spending will lead, in time, to the sunlit
economic uplands, needs to be seen through. Because, frankly, it won’t. You can
reverse austerity, you can re-balance the economy in favour of manufacturing,
you can, theoretically, have a new ‘contract with labour’, as Stewart Lansley wants. And you won’t restore
growth to anything like the levels of the mid-twentieth century.

I’ve seen the future
and it doesn’t work

A week or
so ago the Guardian ran an interesting article by the chief economist for HSBC.
Once you have stopped laughing after reading someone working for HSBC telling
you to “live within your means,” the article is worth pursuing. The author
argues that neither Keynesianism nor austerity work as economic salvations and
we had better get used to a low growth world.

The
conclusion though, coming from someone who wants to preserve the current
economic order, is necessarily weird. “Living within our means is hardly easy
but the alternative is worse: false hope leads ultimately to financial crisis,
political upheaval and social turmoil”.

Conscious
de-growth is one thing, but capitalism and low growth is a poisonous cocktail.

The
revelation that the conviction that high government debt kills off economic
growth was actually based on a spreadsheet error, has convinced many that the Keynesian moment has come again.
Actually, the post-capitalist moment has come, though few seem to have noticed.

For if
capitalism no longer delivers the goods, and doesn’t do so on a long-term
basis, the game is most definitely on again.

About Me

Capitalism is not beautiful, said John Maynard Keynes. It is not intelligent, it is not virtuous and it not just. “But when we wonder what to put in its place, we are extremely perplexed.”
This blog is about the ideologies that mask the ugliness and injustice beneath the surface. And how our perplexity might be diminished.
You can contact me at idealogically@gmail.com